Ethos, the Swiss proxy advisor backed by pension funds, has issued its voting guidelines for the 2014 annual general meeting (AGM) season, including demanding limits on executive bonuses and the number of extra jobs executives can hold.
Ethos said its guidelines had been updated to reflect the so-called Minder initiative that took effect last January 1. Under the measure, listed Swiss firms have until the 2015 AGM season to allow their shareholders to cast binding votes on executive pay.
Starting with base salaries for executives, Ethos said it would oppose those that, without justification, exceeded the median for the company’s peers in a given industry. Regarding bonuses, Ethos said it would only back those that were performance-based and capped at three times the base salary for the chief executive.
Furthermore, Ethos said it only would vote for remuneration committees where candidates were independent and where most of them were not executives at other firms.“The point being that such candidates could have a personal interest in seeing average executive compensation rise across the market as a whole,” it said.
The proxy firm also said it would pay close attention to the firms’ corporate governance rules in the wake of Minder. “In particular, the maximum number of other mandates held by executives will need to be limited to ensure they provide the required diligence and commitment, particularly during crises,” it added.
In related news, Ethos released a study showing that in 2012, executive remuneration at the 100 largest Swiss companies averaged CHF2m (€1.6m) – a level that it described as “very high.”
The study further showed that two years ago, many of the firms were not transparent on how exactly executives were paid. Forty-one companies even provided stock options to executives that were not based on performance but rather on the amount of time spent at the firm, which, on average, was three years. Link